Life Cycle Cost Analyses

A life cycle cost analysis involves the analysis of the costs of a system or a component over its entire life span.Typical costs for a system may include:

• Acquisition costs
• Operating costs:
  • Energy consumption.
  • Cost of failures, repairs & spares.
  • Downtime costs (loss of production).
• Disposal costs.

A complete life cycle cost (LCC) analysis may also include other costs, as well as accounting/financial elements (such as discount rates, interest rates, depreciation, present value of money, etc.).

For the purpose of this reference, it is sufficient to say that if one has all the required cost values (inputs), then a complete LCC analysis can be performed easily in a spreadsheet, since it really involves summations of costs and perhaps some computations involving interest rates. With respect to the cost inputs for such an analysis, the costs involved are either deterministic (such as acquisition costs, disposal costs, etc.) or probabilistic (such as cost of failures, repairs, spares, downtime, etc.). Most of the probabilistic costs are directly related to the reliability and maintainability characteristics of the system.

All this can be shortened to a simplified analysis of LCC and a simple payback time estimate, leaving financial evaluations behind. This would - in many cases - be sufficient in terms of selecting a more energy efficient motor:

The energy efficient motor is typically more expensive to purchase, but viewed over the entire life span (in this case 10 years) the energy is the more expensive. The simple payback time for this calculation can be shown graphically where expenses summarize over time like this:

The simple payback time in this case is only +2 years.